CHEAP MONEY AND BUBBLE RISK: Central banks around the world led by the US Fed have slashed interest rates to historically low levels to fight the COVID-19-related economic contraction through higher liquidity. Now the policy makers are finding that there could be an undesirable side effect for the cheap money prescription in the form of asset bubbles, a situation when the price of assets, such as stocks, bonds, real estate, or commodities, rise rapidly without underlying fundamentals. The hallmark of a bubble is irrational exuberance. If the Fed and other regulators around the world lack tools to prevent companies and households from taking on excessive leverage, the global economy could be headed for a bubble burst and another recession. [COMMENT BY: Babu Das Augustine, Business Editor]
AP